Ben Bernanke, the chairman of the U.S. Federal Reserve, attempted to dispel concerns on Thursday that the central bank’s proposals to implement Basel III capital reforms would not increase the regulatory burden for community banks.
“In terms of Basel III, of course, it’s not one-size-fits-all,” Bernanke said. “Many of the most difficult, complex regulations apply only to the largest and most complex institutions. For the smaller banks, what our proposed rule does is try to strengthen their capital, and many small banks will already meet those capital requirements.”
Bernanke said that the Fed recognizes and acknowledges the crucial role that community banks play in the U.S. economy, adding that the bank would like to hear input from community bankers on issues surrounding the Basel III capital reforms.
The proposal released by American regulators adopts standards established by the Basel Committee on Banking Supervision. Regulators sought to make risk-weights more sensitive by making the changes, American Banker reports.
Additionally, the 2010 Dodd-Frank Act mandates that banks stop relying on external credit ratings in relation to capital requirements. Regulators then had to establish a new method of calculating risk weights.
Bernanke said that regulators are “trying to make sure that we take into account…community banks when we put out the final rule,” according to American Banker.
Banking agencies agreed last month to extend the comment period for Basel III capital reforms until Oct. 22.